TaxTMI 
TaxTMI 
2001 (4) TMI 143
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....nd chassis on payment of duty to Body Builders who constructed the metal body on the said cowl and chassis and returned the vehicle under their gate passes to the Respondents. M/s. Mahindra & Mahindra subsequently sold these vehicles after testing etc. under their own delivery notes cum invoices. In addition the Respondents were sending materials to M/s. Roplas (I) Ltd., Pune for body building under the provisions of Rule 57F(2) of the Central Excise Rules. According to the Department duty of excise was not paid on full value of vehicle at which the said vehicles were sold in the course of wholesale trade though the Respondents had recovered the duty from their customers. The Central Excise officers seized 43 such vehicles which were provisionally released subsequently on execution of bond and payment of differential duty. A show cause notice, dated 4-7-1991 was for demanding differential duty, for confiscating the seized vehicle and for imposing penalty on M/s. Mahindra & Mahindra. A few officers of the Respondents and body builders were also asked to show cause as to why penalty be not imposed on them under Rule 209A of the Central Excise Rules. The Collector, Central Excise, und....
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.... for which the vehicle and chassis are entrusted by the manufacturer to the body-builder namely, steel body fabrication in accordance with the specifications and requirements of the manufacturer. 8. The body-builder further undertakes to insure the vehicles and chassis against all risks, including loss by fire, theft, riot, strike and civil commotion. The body-builder agrees and undertakes to pass on the value or benefit realised by the body-builder under such insurance policies to the manufacturer." 4.2The learned SDR also mentioned that Shri Mohan Raghavan, Sr. Executive, had admitted in his statement dated 22-2-1991 that no sales tax was paid on clearances of cowl and chassis to body-builders because the same had not been sold to them. He further said that the Respondents were even directing the body-builders to procure raw materials from specific persons; that this is apparent from their letter dated 8-8-1988 addressed to M/s. Neelima Motors, Thane to procure carpet material from M/s. Supreme Non-woven (P) Ltd.; that the ownership of the Respondents is further evident from the fact that in respect of export of vehicles, the Respondents were getting cash compensatory suppo....
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.... only after inspection and certification by ISI which is compulsory to make gas cylinder valve marketable, the valves should be treated as fully manufactured and liable to be entered in the R.G. 1 register. He also relied upon the following decisions :- (i) Taylor Instrument Co. (I) Ltd. v. C.C.E., New Delhi, 1995 (77) E.L.T. 149 (T) (ii) H.M.M. Ltd. v. C.C.E., 1994 (74) E.L.T. 19 (S.C.) (iii) C.C.E. v. Sudershan Beopar Co. Ltd., 1993 (64) E.L.T. 359 (T) (iv) National Cables v. C.C.E., Meerut, 2000 (117) E.L.T. 390 The learned DR also placed reliance on the decision of the Larger Bench in the case of C.C.E., Meerut-II v. Prabhat Zarda Factory Ltd., 2000 (119) E.L.T. 191 (T-LB) wherein it was held that the place upto which the ownership remains with the buyer shall be the place of removal of the excisable goods. 6.The learned DR further argued that the Respondents recovered central excise duty on full value of the motor vehicles at which these vehicles were sold by them. He referred to a circular, dated 25....
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....The learned DR commented that the transaction between the Respondents and body-builders were just paper transaction and referred to the decision in S.P. Jaiswal v. C.I.T., (1997) 224 I.T.R. 619 (S.C.). 7.On the other hand, Shri V. Lakshmikumaran, learned Advocate, submitted that ownership is not relevant for discharging the duty liability as held by the Supreme Court in the case of Ujagar Prints v. U.O.I., 1988 (38) E.L.T. 535 (S.C.); that in view of this the fact that ownership of vehicles and chassis remained with them is immaterial. He, further, submitted that the Emission test is conducted in respect of chassis which was admittedly manufactured by them only and cleared only on payment of duty; that load factor again is as per design of the chassis. He also mentioned that all the decisions, relied upon by the learned DR, in support of his contention that the motor vehicles were manufactured by the Respondents were in relation to the manufacturers who were undertaking all the manufacturing process; that in an integrated manufacturing activity, certainly RG1 stage does not reach before the testing of the goods; that, however, the activity of testing and packing does not change ....
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....ng case on the subject of manufacture, the Supreme Court has held in Union of India v. Delhi Cloth & General Mills Co. Ltd., 1977 (1) E.L.T. (J199) that to amount to manufacture "there must be transformation; a new and different article must emerge having a distinctive name, character or use." It is not the case of the Department that after test conducted by the Respondents, a new and different product emerges having a distinctive name, character or use. Similarly the Supreme Court laid down in J.G. Glass - 1998 (97) E.L.T. 5 (S.C.) case, a twin test "for deciding whether the process is that of 'manufacture'. First, whether by the said process a different commercial commodity comes into existence or whether the identity of the original commodity ceases to exist; secondly, whether the commodity which was already in existence will serve no purpose but for the said process." Applying these two-fold test, it cannot be said that a different commercial commodity comes into existence at the hands of the Respondents. In T.I. Diamond Chain case, appeal against which has been dismissed by the Supreme Court, the Appellants were purchasing sprockets from manufacturers and after testing for qua....
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....lue of the complete motor vehicles. The Tribunal held :- "The duty having been levied and collected at the stage of emergence of goods namely chassis as specified in the Tariff, therefore, the manufacturer of motor vehicle at the hands of a separate independent manufacturer, cannot be considered as having being manufactured at the hands of the assessee." The Tribunal further held : "Therefore, mere fact of the Appellants invoicing the full vehicle from their depot does not lead to the inference that the motor vehicle has been manufactured by them or it was manufactured on their behalf. They are adding their margin of profit, insurance and other incidental charges." 10.We also observe that the Respondents had sought permission to remove inputs or partially processed goods under Rule 57F(2) and/or Notification No. 214/86-C.E., dated 25-3-1986, which was refused by the Assistant Collector, under letter, dated 3-11-1987 on the ground that the partially processed vehicles are chassis and cowl and not open jeep and the chassis and cowl are neither input nor semi-finished and is classified under sub-heading 8706.30 attracting duty. By holding so, the Department cannot now argu....